Commentary
Following rumors last week amid missile attacks all over Ukraine, Russia over the weekend announced it was considering not renewing the grain agreement that expires in March unless it saw some concessions that lifted sanctions against its Ag exports. Rumors then confirmation of this have send wheat futures up from the 7.40/ 7.50 area to 8.00 on the Board. Market pulled back in turnaround Tuesday fashion, so the jury in my view is still out as to direction here. It is clear to me that the trade remains on edge on the heels of a potential major offensive in the Black Sea with the only major bearish potential coming from an extension of the corridor deal. Chicago wheat traded to 9.50 in October with KC at 10.37 on similar concerns about Russia closing the pathway. It is my belief, US stocks for HRW remain tight and from with some speculation that some producers are less than excited about the new crop potential even if we see better moisture into the spring in key areas. That seems to always be the case that a few are complaining. Domestic wheat demand doesn’t have the bulls too excited as U.S. wheat sales abroad have been lackluster. The recent modest rebound in the U.S. dollar index isn’t helping that situation like the light bounce we saw after CPI. A continued bounce in the US Dollar index would likely further hinder exports, putting U.S. wheat prices at a bigger premium to that of global competitors. It is my opinion that money flow is in control of the market right now with geopolitical issues the spark to push values possibly higher. Russia remains the most competitive wheat in the world and the US is the most expensive on a protein adjusted basis. Therefore, a supply side shock like a reemergence of the ground war in Ukraine maybe needed to ignite wheat values to last Octobers highs amid a Black Sea shutdown for Ukrainian grain in my opinion.
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